Brutish, nasty—and not even short: the ominous future of the eurozone

“[Wolfgang Schäuble’s] Greek equivalent Yanis Varoufakis, for his part, may have learned from his encounters of the third kind with the Eurogroup that the only role there was for Greece in the Europe of monetary union was that of an underfed and overregulated welfare recipient. Not only was this incompatible with Greek national pride; more importantly, what the governors of Europe would be willing to offer the Greeks by way of ‘European solidarity’ would, at best, be too little to live on. […]

Most importantly, with Greece staying in common currency, [Angela Merkel] can now reassure her core constituency, the German export industry, that none of the captive members of eurozone will ever be released, not even on probation […]

More importantly, in return for having proven themselves good Europeans by getting rid of Syriza mark I, Greeks will be hoping for above-average economic growth, clearly not of the anaemic Spanish sort currently being offered as proof for the miracles austerity can do. After a decade of misery, growth will be expected to first restore the country to its relative position before the crash and then move it on to something like European convergence. Only neoliberal economists can find this realistic, and only on condition that all their recipes are followed to the letter. That is in practice, never. […]

Not that the limits of development assistance for backward regions in a currency union with high regional disparities were unknown. Germany and Italy have experience here that is far from encouraging: Italy in the Mezzogiorno (southern) regions, Germany in its Neue Länder of the former GDR—the latter being another case of a misconceived monetary union with disastrous economic effects. Both countries are today transferring roughly 4% of their annual GDP to their poorer regions just to prevent the difference in per-capita income getting bigger.


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